Analysis of the initial steps of the Market Comparison Approach (MCA) for its application to agricultural land: parameters of the market segment and real estate data

Abstract

In the current Italian real estate market, estimates of the market value of rural properties are carried out by appraisers mainly using the single-parameter comparison procedure and, less frequently, the income capitalization method. To overcome problems of appraiser subjectivity and other issues related to these methods, and to gradually comply with real estate appraisal standards, this research paper aims to develop and validate a scientifically rigorous method. This article carries out a first attempt to apply the mixed approach based on the integration of Market Comparison Approach (MCA) and General Assessment System (GAS) to agricultural land, currently used only in the field of urban real estate appraisal. The study focuses on the first steps of this valuation procedure: choice of the parameters which characterise the market segment and identification of the land characteristics to be included in the procedure. These two steps are preparatory to the following phase concerning the estimate of marginal prices, which represents the core of the whole valuation procedure. In the current Italian real estate market, estimates of the market value of rural properties are carried out by appraisers mainly using the single-parameter comparison procedure and, less frequently, the income capitalization method. To overcome problems of appraiser subjectivity and other issues related to these methods, and to comply with real estate appraisal standards, this research paper aims to develop and validate a scientifically rigorous method. The Market Comparison Approach (MCA) is used as a starting point for a comparative multiparameter approach, which is currently only used in the field of urban real estate appraisal.This paper carries out a first attempt to apply the MCA to agricultural land, contributing an initial exploration of developing the proposed methodologies. Specifically, this paper reports the first steps that have been carried out in this line of research: choosing the parameters to identify the market segment; identifying the characteristics to include in the procedure for which to determine the respective marginal prices.